Much has been written of late about the deteriorating relationship between Turkey and Russia and how this has negatively affected the economies of both countries. A trade war of any kind is never good, but in this case, as in the case of European sanctions directed at Russia in the wake of the Crimean annexation, direct political conflict has been the instigator of disruptions in the status quo for business. While this often hurts the most vulnerable portions of the population disproportionately, state interests are affected negatively as well. Military actions might be viewed as “diplomacy when words fail,” but the stringent economic responses as we are seeing today could have ripple effects that last years.
International trade relations are not only important for economies of countries but also play a big role in everyday life of ordinary people. Whenever there are conflicts between different nations as the result of political misalignment or competing political aims, the citizens of those countries are adversely affected. Most recently, the trade relations between Turkey and Russia have been damaged by the current conflict in Syria. Without discussing the geopolitical aspects of the conflict, we can state with certainty that the situation has damaged the economies of both countries. Russian sanctions against Turkey have resulted in people losing their jobs, the elevation of some prices and the introduction of a new visa regime. This has also led to the inability for Russian vacationers to travel to favorite destinations, and even a media war attempting to turn the people of Turkey and Russia against each other.
History of Russia and Turkey Trade Relations
To understand this situation better, let’s have a cursory look at the long history of Russia-Turkey trade relations. From the late 16th to the early 20th centuries, relations between the Ottoman and Russian empires were often strained, as the two powers were engaged in a number of Russo-Turkish wars. The relationship has been up and down throughout, but after the dissolution of the Soviet Union it finally stabilized, leading to Russia becoming Turkey’s largest energy provider while Turkey became the top foreign destination for Russian tourists. According to the Republic of Turkey Prime Ministry Investment Support and Promotion Agency, annual trade volume in 2014 between Turkey and the Russian Federation amounted to approximately USD 33 billion. Commercial and economic ties were expected to grow since both countries had set a bilateral trade volume target of USD 100 billion by the end of 2020.
There have also historically been close ethnic ties between the Russians and Turks. The Slavic and Turkic peoples have been in contact for hundreds of years along the Eurasian Steppe. Russians and Europeans used the name Tatar to denote Mongols as well as Turkic peoples under Mongol rule (especially in the Golden Horde). The Tatars formed the Turkic-speaking population of Tartary – the lands ruled by Mongol élites from the 14th century until their conquest by the Russian Empire in the 18th to 19th centuries. The largest group by far that the Russians have called “Tatars” are the Volga Tatars, native to the Volga region (Tatarstan and Bashkortostan), who for this reason are often also simply known as “Tatars,” with their language known as the Tatar language. As of 2002 they had an estimated population close to 6 million. These shared ethnic and cultural roots have facilitated cross-border trade to varying degrees over centuries.
What Is At Stake
International trade is defined as the exchange of capital, goods and services across international borders or territories, which could involve the activities of the government, businesses, and individuals.
(Below is the list of key areas of economic and trade relations between Russia and Turkey, along with notes on current developments.)
Tourism
· Turkey’s seaside resorts are among the most popular tourism destinations for Russians; for Turkey, Russia is the source of the second-largest number of tourist arrivals after Germany
· Russian Foreign Minister Sergei Lavrov advised Russians not to visit Turkey and said the threat of terrorism there was no less than in Egypt, where a bomb attack brought down a Russian passenger plane last year
· Russia’s tourism agency also recommended the suspension of package holiday sales to Turkey
· Turkey, which has visa-free travel with Russia, had become more attractive for Russian tourists after Moscow suspended flights to Egypt following the previously mentioned downing of a Russian airliner over the Sinai Peninsula by a terrorist bomb.
· About 4.4 million Russians, including 3.3 million Russian tourists, visited Turkey in 2014
· After the downing of a Russian fighter plane that entered Turkish airspace, the Russian government sanctioned vacation package tours to Turkey
Food
· Turkish food exports so far had not been affected by Moscow’s ban on most Western food imports launched in 2014. In 2014, 4 percent of Turkey’s exports, mainly textiles and food, worth $6 billion went to Russia, according to Renaissance Capital
· Turkish food exports to Russia have fallen 40 percent since sanctions have been imposed
Energy And Commodities
· Turkey is the second-largest buyer of Russian natural gas after Germany. Russia is Turkey’s largest natural gas supplier, with Ankara buying 28-30 billion cubic meters (bcm) of its 50 bcm of natural gas needs annually from Russia (Turkey has recently signed an agreement with Qatar for liquefied natural gas shipments as a backup)
· Russia also supplies oil and oil products to Turkey. Russia was its fourth-largest supplier in 2013, according to the Russian embassy in Turkey
· Turkey, together with Egypt, is the largest buyer of Russian wheat. It bought 4.1 million tons of Russian wheat in the previous marketing year, which ended on June 30
· Turkey is also a large buyer of Russian steel semi-finished products
Projects
· Turkey commissioned Russia’s state-owned Rosatom in 2013 to build four 1,200-megawatt reactors in a project worth $20 billion.
· Russia and Turkey also have the Turk Stream pipeline project, an alternative to Russia’s South Stream pipeline to transport gas to Europe without crossing Ukraine. The South Stream plan was dropped last year due to objections from the European Commission.
· Russia’s Gazprom has recently almost halved the planned capacity of its Turk Stream gas pipeline project to 32 billion cubic meters (bcm) per year.
· Turkish construction firms have over $10 billion in contracts from Russia
According to Professor Gurkan Kumbaroglu from Bogazici University’s department of engineering, “Turkey has close strategic ties with Russia in terms of energy relationships….it may be that the Turkish Stream project as well as the nuclear energy project, which is going to be constructed by the Russians, could be affected.” Although Kumbaroglu did not believe gas supplies would be affected in the short-term, he feared for the longer-term projects: “In the longer term, those strategic projects may be affected and these projects are actually to the benefit of both countries.” He urged the leaders of Turkey and Russia, President Recep Tayyip Erdogan and President Vladimir Putin, to “stay calm and consider the benefits of the cooperation of the two countries,” as quoted by CNBC.
According to research by the World Travel and Tourism Council (WTTC), travel and tourism contributed, either directly or indirectly, $38 billion to Turkey’s GDP (gross domestic product) in 2014, with over 41 million visitors. The tourism industry also sustained a total of 2.1 million jobs in Turkey, employing more people than the mining, chemicals manufacturing, automotive manufacturing, financial services, and banking sectors, the WTTC said. The tourism industry in Turkey has already been impacted by the escalating conflict. This adversely affects working people to a much greater degree than it affects government ministers. Many Russians have also been inconvenienced in their vacation planning.
Neither Country Can Afford A Trade War
While it certainly inflicts economic hardships, the current conflict between the two countries has not created much in the way of direct animosity between their citizens. As mentioned above, the decrease in the tourist reservations in main tourism centers of Turkey such as Antalya, is a big problem for Turkey and has negatively impacted the economy. Russian tourism is perceived as the backbone of the economy of this Mediterranean city. Business owners are not at all happy that their reservations from Russia are being cancelled.
In addition to tourism, Turkey is also home to many Russian citizens, partly due to her attractive job opportunities in the service sector, such as au pair, elder care, and patient care. Many trained and educated Russian citizens prefer to take these jobs in Turkey due to higher income opportunities regardless of their actual occupations in their home country such as medical doctors, engineers and teachers. With the latest crisis, many of these residents have started leaving Turkey permanently due to their fears of an escalating conflict or sanctions from home. This is creating a problem in major Turkish urban centers, which have a shortage of quality home-care providers.
A February 6, 2016 report in The Economist magazine estimates that Russian measures could result in a 0.7% decline for Turkish GNP this year. The Turkish government has already been struggling with declining national growth rates since the last decade, although living standards have improved markedly in the country. Also according to The Economist, Turkish construction firms have well over $10 billion of Russian contracts on their books, which could be thrown into jeopardy. The effects of these business disruptions trickle down to the workers at companies, and have the potential to cause social instability when people find themselves out of work and facing economic hardships.
More Recent Geopolitical Factors
Regardless of economic disadvantages resulting from the conflict, the urban population in Turkey is largely immune to the provocative climate between the two governments. Turks are also largely neutral in regards to the current crisis. This is partly because of the large distance between the two countries and more importantly, the more recent lack of cultural connection during the 20th century. While there have been close relations between the two countries economically and diplomatically, the Truman Doctrine of 1947 was a significant turning point.
Due to the increasing Soviet threat on her borders, Turkey accepted the Marshall Plan in 1948 and joined NATO in 1952. This put Turkey in the “Western bloc”, while isolating Russia behind the iron curtain of Eastern Europe. For the most of the second half of the 20th century, there was almost no cultural contact between Turkey and Russia. With the dissolution of the Soviet Union, Turkish presidents like Ozal and Demirel reached out to Russia in order to advance their Pan-Turkic ideals. Their idea was to grant Turkey’s help and guardianship to ethnically Turkic people in Russia and Central Asian Soviet countries. This factor influenced the establishment of trade relations between Russia and Turkey after 1991.
Populist Power Politics
Thus, from the perspective of the average Turkish citizen, economic opportunities are of primary interest in regard to bilateral Russian relations. For many, the current conflict is largely seen as an epic power struggle between Putin and Erdogan, perhaps akin to other seemingly intractable conflicts around the world such as between India and Pakistan, North Korea (DPRK) and South Korea, and so forth. In Turkey, both presidents are seen as populist leaders who have the power to mobilize the lower income, lesser-educated masses under their influence. Although many smaller businessmen also still support Erdogan, even if with a measure of skepticism, the appeal of both leaders follows a worldwide trend towards populist leaders, such as with Donald Trump in the U.S.
Just as Putin has moved to strengthen his powers in Russia over recent years, Erdogan has sought to increase the powers of the Presidency within the parliamentary system in Turkey. The current dissonance between the governments of Turkey and Russia may not be resonating intensely with the majority of their people, precisely because both societies have enjoyed their economic partnership long enough to have benefited greatly. The general sentiment of the population seems hopeful that as soon as this conflict is resolved, the beneficial relationship can continue to grow in prosperity.
With the likely continued escalation in tensions throughout the region, and the possibility of further tensions between Turkey and Russia over the Syrian war, it is imperative that the governments and officials of both countries keep the channels of communication open while finding ways to cooperate in order to diffuse conflict situations as they arise. The people of both countries are depending on not only the leadership, but also national and international laws and peaceful relations to secure their national interests and economic welfare. It is hoped that the long history and productive relationships in trading between the countries, along with shared cultural, ethnic, and economic ties, will provide the incentive and initiative to actively and urgently seek remediation of differences and a resumption of constructive working diplomatic relationships and trade.
*Article written by Professor Tom Stein and Anna Mezentseva with Alper Tuzcu
